HSBC's Restructuring in India

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Case Details:

Case Code : BSTR148
Case Length : 12 Pages
Period : 1999-2004
Organization : HSBC India
Pub Date : 2005
Teaching Note :Not Available
Countries : India
Industry : Banking

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Background Note

HSBC is a leading global player in the banking and financial services industry. It is the third largest bank in the world in terms of market capitalization (Refer Exhibit I for top 10 banks in the world).

It provided a comprehensive range of financial services, namely, personal financial services, commercial banking, corporate investment banking, private banking and other related businesses. HSBC was established in 1865 to finance the growing trade between Europe, India and China. Scotland-born Thomas Sutherland (Sutherland), who worked for the Peninsular and Oriental Steam Navigation Company, established the bank.

He found that there was considerable demand for local banking facilities in Hong Kong and on the Chinese coast. Sutherland established a bank in Hong Kong in March 1865, and another in Shanghai after a month. The banks' headquarters were at Hong Kong.

Soon, the bank opened branches around the world. The emphasis continued to be on strengthening the presence in China and the rest of the Asia-Pacific region. By the end of the century, HSBC emerged as the foremost financial institution in Asia.

World War I (1914-1919), however, brought disruption and dislocation for many businesses. The 1920s saw a revival with HSBC opening more branches. During World War II (1941-1945), the bank was forced to close many branches and its head office was temporarily shifted to London. After the war, the headquarters was shifted back to Hong Kong.

The post-war political and economic changes in the world compelled the bank to analyze and reorient its strategy for continued business growth. The acquisition of the Mercantile Bank⁴ and the British Bank of the Middle East (BBME)⁵ in 1959 laid the foundation for the present day HSBC Group...

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4] Mercantile Bank was established as a state bank in 1932 by William P Murray. In 1945, it was converted to a national bank and was renamed as Mercantile National Bank of Indiana in 1969. Mercantile Bank has 260 shareholders, including all of its directors, who live in Northwest Indiana.

5] Established in 1889, BBME began its operations as Imperial Bank of Persia, with a Royal charter from Queen Victoria and support from the Government of Persia. The head office was in London, but all the branches were located in the various towns and cities of Persia, with the Chief Office based in Teheran. In 1935, the name was changed to the Imperial Bank of Iran. In 1949, it became the Bank of Iran and the Middle East. The present name was adopted in 1952.